This Week in Startups - E1130: “Billion Dollar Loser” Author Reeves Wiedeman on WeWork’s epic rise & crazy collapse, Adam Neumann’s unique behavior, hypocrisy, red flags & more

Episode Date: October 27, 2020

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plan for the future. Learn more at SVB.com slash next Silicon Valley Bank built for what's next. Hey, everybody, welcome to this weekend startups. We've got a great show for you today. With us today is Reeves Whiteman. He recently authored Billion Dollar Loser, which, is the story of Adam Newman, the subtitle, The Epic Rise and Spectacular Fall of Adam Newman and WeWork. It's a very straightforward book written in narrative fashion without too much judgment.

A little bit of judgment on the margins, but Reeves, welcome to the program. I guess when you're writing a book about Adam Newman, you don't need to actually embellish or, I mean, just telling the story straight, he's insane. And you never say he's insane, but the behavior is so insane, deranged, inappropriate, that it just sort of, the story tells itself, right? Yeah, I think there was a sense of just wanting to play it straight here. And reality was what's much stranger and weirder and more interesting than fiction could be. So you just kind of have to get out of the way and let Adams, both his words and actions, kind of do the talking.

Now, you were writing for The New Yorker and New York Magazine when you started covering him. I don't think you covered him at the New Yorker, but you did start at New York Magazine. Is that correct? Yeah, back in the spring of 2019 at New York Magazine. Got it. So he was well on his way to getting kicked out of the company. And you had access to him, correct? Well, at that point, he was still flying high. So this was actually sort of a year and a half ago, early 2019. The company was just recently worth $47 billion, at least decreed by SoftBank and had just came up with its mission statement of elevating the world's consciousness. And the IPO actually hadn't even been announced yet. And that's when I met Adam was kind of at this point where he was still talking about, you know, our growth is going to be.

bigger and faster than Amazon's and still sort of flying high was when I had my audience with him. Got it. And then in terms of when you're writing a book like this, how many people do you wind up talking to to be able to construct the narrative, correct? Then we'll get into the narrative, of course, but I'm just curious setting the table here because it's your first book. How long does it, how many hours and how many people do you have to talk to to really make sure you have an accurate picture of what happened? Yeah. A lot. And that's kind of the only way to do these kind of books, especially about these companies that become so big and sprawling. Ultimately, I talked to somewhere in the neighborhood of 250 people, and that goes for employees all the way from kind of the lowest level junior people, all the way up to the most senior people at the company. Some of the investors who invested in WeWork over the years, landlords, this was obviously a company that really interacted with various people and various industries.

And some of those conversations were four, five, six hours long. I mean, especially I think, yeah, and once things went wrong, I mean, this was a defining experience for so many people who worked there. And a lot of them sort of told me they treated our conversations as kind of therapy sessions, where they just got to sit there and kind of talk through what they had experienced. Yeah, and I see Ken Aleta gave you a blurb on the back of the book. and he's a great storyteller and gets people to talk. Did he mentor you in any way in terms of getting this story to paper?

He didn't. So, you know, my relationship with Ken is I started out as a fact checker at the New Yorker magazine where Ken has worked for a long time and worked with him there. So, you know, in an unofficial way, I got to sort of see the way that he works. And, you know, you realize that to get these kinds of stories to be as rich and detailed as you want them to be. It all comes down to, can you talk to the right people and as many people as you can to sort of fill in all these details? The fact checking at The New Yorker is a legendary position and a process. Having, I had a story written about me by Larissa McFarck back in the day and went through it.

How was your fact checking experience? It was extraordinary because I think it was two different people contacted me. maybe they contacted me three different times. And, you know, it was everything from, do you have a bulldog and can you spell the bulldog's name? Do you live at this address? Do you know this person? And when you're the subject, you're kind of trying to figure out like, well, who did they talk to and where did this come from? And then you don't really have the ability to say the person who said that or where did you get that from?

So you kind of get into this little bit of a dialogue, like what do you mean by that? And did you say this? And it felt like it was like a very, um, uh, uh, They were trying to get the fact straight without telling me what the story would be, who the subjects were. And it was actually, I felt very good about it because the only other time I had that type of fact-checking done was in Wired magazine. And the times I've been in the New York Times or since when I get mentioned, I get mentioned in a story in the Atlantic or New York magazine. And there's no fact-checking. Nobody ever, journalists don't even call you to tell you, they don't even give you a heads up.

You're going to be in the story now. So things have changed radically, I guess, because the budget. don't exist anymore, did you fact-checking? Yeah, the good run still do. And, you know, with New York Magazine, we have fact-checkers and it, you know, but the budget is hard and people would often ask me like sort of, you know, what's, what's the secret to the New Yorkers fact-checking and, you know, how do you guys do what you do? And the reality of it is manpower.

It's, you know, there is a sort of army of, I think this might be outdated. But when I was there, there were 16, 17, 18 fact-checkers. who fact-check every word of anything that went in the magazine, even the cartoons. And we did go through a fact-checking process on the book. Book publishers do not have fact-checkers on staff. It sort of is incumbent on the writer to choose to have a fact-checker if they want. And I like that part of the process.

I would rather go back to you, Jason, and say, here's what I'm saying. Here's sort of why I'm saying it. Is this right in both a fix any mistakes and kind of give you or whoever it is a chance to, you know, add some context. And in some cases, sort of add even more interesting context. My understanding back then was the fact checkers got paid like $30 or $40 an hour of the freelancers. What does a fact checker get paid if you would take a guess at a New Yorker or a publication on that scale, like a condo-ean-guise publication?

When I joined the company, I was on state. staff and I believe I was making something in the neighborhood of $40,000 a year. So, you know, in New York City, it's, you can survive. But, uh, that was 10 years ago. It was about 10 years ago. Was that 10 time period? Uh, right around then. Yeah.

When I came into the workforce in 1993, it was 500 bucks a week, I think, Condon asked in those kind of places. So it was 30,000. So people who think that these journals and jobs get paid a lot is, you got a little Literally went up 10,000 in 15 years. It's crazy, right? Yeah, it's a tough business, unfortunately. Since we're on this subject, and I think this inside baseball is just absolutely fantastic,

and I appreciate you delving into it. Sure. What do you do when two different subjects or three different subjects have a Roshaman moment, and it's three versions of the truth, right? and everybody's looking at it from their perspective. And did you have, what's an example of a moment like that? And then how do you referee it? It's hard.

And especially, you know, writing a book about this, you know, the early events. I mean, the events go back to Adam Newman's childhood in some ways, or at least at the beginning of the book. And, you know, the founding of WeWork was 10 years ago. And, you know, there was a, I mean, to pick sort of a minor example, there's a moment in the book where Adam is giving kind of a talking to to WeWork's early employees saying you need to dress better

like you're wearing these schlubby t-shirts and cargo shorts and we need to look professional and you know one of the employees kind of points to Adam and said but Adam you're wearing a t-shirt and jeans and Adam says yeah well my t-shirt costs $200 it's a nice t-shirt it's this is not the kind of t-shirt you wear exactly. It's a James Pearse t-shirt, by the way.

It was. And so he, anyway, like, that was just a moment. And I heard that from one person who sort of told me the story as a particular employee having said it. And then I talked to someone else, and I didn't even bring it up. And they just told me the same story, unprompted, but it was a different person who was asking the question. Eventually, this was not the most important point in the book, but I did talk to. Right. At one point, three different people who were there and remember it.

And the first guy who remembered it one way when I came back to him and said, you know, these other people remember it this way that he was kind of like, yeah, you know, I mean, my memory is a little foggy and I think that, I think that might be right. So it's a sort of triangulation game. Yeah. Yes. Yeah. And you do the best you can in terms of representing, you know, what happened.

Because it's, you know, it's now it's the first, it's kind of the first draft of history, right? like the magazine article then morphs into the book and, you know, then people write subsequent books and these things kind of get cemented. We'll get back for this quick break. I want to talk about what was the viable part of the business. And when you felt the business or, you know, when you're telling this story, the first indications that Adam was getting disconnected from the reality of what was a profitable and promising business in the early days when we get back on this weekend startups.

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Terms and conditions, of course, apply because LinkedIn's giving you that $50. Let's get back to this amazing episode. All right, welcome back to this week and startups. The book is billion dollar loser Reeves. Weidman is here to talk about it. It's a great book.

And I listen to the audiobook. Absolutely fantastic. Thanks for getting me an early copy of it. But I did buy the book. I got a copy of it here. I appreciate that. And yeah, of course. And it's out today the day we're taping this, but this might be coming out the next day.

So in the book, there is this first version of WeWork that many people don't know about, which was Green Chair, which was going to be like an eco-friendly, co-working space. Adam had two partners on it. He had talked to landlord in Brooklyn. into giving him the space. And it worked really well. Gothamist, the blog was sort of housed out of there. And it went so well that the landlord bought out Adam and his partners. Tell that part of the story,

because I think it's instructive that this was a great moment in time to create this very innovative idea of offices as a service. We look at like one of the big, when we used to raise money for companies, the first thing you did was buy some servers. and the next thing you did was sign out to your lease and then wonder if you had signed for too much or too little. And this was a pretty innovative idea. Was it not? It was. And this was coming out of the financial crisis of 2008. It was actually sort of right in that. And in some ways, it felt like a bad moment. But in hindsight, it was it was kind of perfect because you had all these people looking for

for different solutions. You had companies downsizing. You had a lot of freelancers. And as the company grew, as, you know, yeah, they had Green Desk for about a year. gear. Oh, green desk, not green share, yes. Yeah. You know, different. I mean, the funny part about it is there was also a half a mile away, a place called green spaces that was basically doing the same thing. So there was this little kind of boomlet of these companies where it was like, yes, the real estate world does not seem to be meeting the demands and specifically the demands of the startup world, which was right now I might have two people next year. I might have 20 or I might still have two.

I don't totally know. And so what we were provided was, you know, beyond what everyone talks about, which was the beer keg and the coffee and the nice place to kind of meet was flexibility. And you could have different offices of different sizes. You could do a month-to-month lease. You just had a lot more adaptability to whatever sort of your needs were. So I think for a long time, and especially as kind of the startup world was really getting going again after the financial crisis, it really served a pretty clear need for that community in particular.

And it was so profitable and valuable, that Green Desk, that the landlord, who owned many buildings in Brooklyn, said to Newman and his partners, I want to give you $500,000 each and buy you out. And this is after one year so that I own 100% of this. So it was confirmation that this was a brilliant idea. It was working and he said, just stay the hell out of Brooklyn. You have a non-compete to stay at a Brooklyn. One of the three partners went back to Israel, was like, I got my 500, but he talks the other founder into, hey, let's start. We work and find another space and start again in lower Manhattan, correct? Yeah, and Green Desk still exists. I'm here in Dumbo right now and it's still here a few blocks away. And that landlord went and expanded it into half a dozen spaces in Brooklyn. And

And what Adam and his co-founder, Miguel McElhelvey sort of said was they wanted something bigger. They wanted, they didn't want to just stay in Brooklyn. And they also wanted to run their own business. They didn't want to necessarily be a partner or sort of, oh, this landlord as kind of the person who had the space. So it was clear the idea had legs. the tricky part was sort of still convincing kind of landlords to take a risk on this company because it was sort of a risky model it had existed before and especially in recessions, which we were in at the time.

It's a potentially dangerous model because if you can't find people to rent your little offices out of, you're still on the hook and people had gone under in the past from this very same sort of idea. In the dot-com boom, we had another company, Regal. Regis. Regis, that was it. Regis. And they had gone public, became worth a couple billion dollars. And they had the same exact story, which is, same idea and same story, which was, hey,

if there's a recession, then all these big companies need to get smaller and they need to downsize. And freelancers need to get out of their house and have a place to work, which turned out to be complete utter nonsense. Yeah. When there's a recession, there's too much space and it's everywhere. And, you know, it's like the market is flooded. you know, and there's just no way to have a viable business if you were subletting.

Yeah, and for a lot of people watching the WeWorks story, it felt like deja vu. I mean, you can go back and we mentioned in the book in 2000, there was a fast company profile of Regis called Office of the Future. And like everything about it, you could basically take all the words and take Regis and replace it with WeWork. And that's what people were saying 10 years later. And so people in the real estate world were, you know, couldn't understand why there was this sense that WeWork had figured something new out. I mean, they, you know, they saw that if you

looked at a Regis space, it was bland. It was, you know, white walls and kind of boring decor. And WeWork was clearly different and trying to be something different. But it was in a sort of a branding sense, not in a changing the whole economics of business. Yeah, Regis was known as having like dorky spaces. Yeah. And they were, they were not made of glass. The thing that was unique about WeWork was, I think in terms of the design, it wasn't an open floor plan, which people thought was the best model, but that kind of sucked because you were constantly getting interrupted. It was closed offices, but they were all glass, but they were micro.

So this was actually another great innovation of, I think, his model, which was you get to have, you know, you get to feel like you're part of something, the whole kibbutz thing. Like, he grew up on a kibbutz, which I think we could explain to people who don't know, but it's basically a commune in Israel where everybody shares jobs and everybody gets paid the same amount. It's kind of like a socialist thing. And, I mean, this is the kind of hypocrisy that I think comes out in the book without you pointing it out, like, explicitly by like tapping your teachers, you know, stick on the chalkboard. But, yeah, learn the lesson, kids. He was a total hypocrite. Like he was telling everybody to live in this communal way, but he was cashing out his stock

every chance he got and living a crazy lifestyle. Yeah. And, you know, there is a level at which I wondered about that hypocrisy and wondered if it was kind of all BS as he was talking about, you know, we want to change the world and make people's lives better. And I came to believe he believed that, that he did think that WeWork was doing that, that it wasn't just sort of a PR stick. Adam came to believe that he himself and WeWork as a company were sort of uniquely positioned to solve various kinds of problems.

Of course, it does become hypocritical when you're talking about, as he and his wife, Rebecca Newman did, living an asset light lifestyle, along with having an asset light business, although in WeWork's case it was very asset heavy business. There was this hypocrisy that I think weighed on the company once it became clear that, you know, they had a $60 billion, or excuse me, $60 million jet and seven homes and kind of all these instances of excess at the company that didn't totally jive with the message that they were saying publicly. So at what point do you feel like in telling this story, he got disconnected from the reality of running the business, which was basically, basically, basically a solid, non-technical business, but a good business that could have a decent margin, not a killer margin. But it was an innovative product, certainly. There was demand for it. It was profitable.

He had sold the previous version of it. This is all checkboxes on the way. I mean, there was product market fit here, no doubt. There was some level of margin here. And there was obviously things that could be built on top of this, like big companies being involved and community and maybe a network, you know, on the margin. could be interesting or maybe people could sell into this group of people or having this, you know, the Frappuccino in every city is the same.

The Uber experience in every city is the same. There's some value to that. That anybody who goes to a WeWork in Tokyo or London or New York or San Francisco has the same experience. So those things all added up to me. When did, in your mind, was the disconnect from reality starting? I think there's sort of two points, one that leads up to the next. and the first one gets at the idea you hit it of creating this network.

And around 2012, Adam started talking about the company as a physical social network. They were not a real estate company. We're creating this network of buildings where, you know, they kind of try, we were tried to sort of create what they called a member network. It was sort of an internal proprietary LinkedIn. Of course, the problem was LinkedIn exists. LinkedIn is good for what it is. there wasn't, it wasn't necessarily clear what kind of, what was the tech aspect that,

that Adam clearly wanted the company to have, what would that actually be? And so that pushed the company into this kind of, you know, they were of the startup world and then they kind of wanted to be of the Silicon Valley sort of tech boom. And that all sort of led up to this moment where you get to 2016, the company's growing still pretty exceptionally every year, year over year, revenue is doubling. They're growing all over the world, but they're running out of money. They're running out of the venture capital. They've tapped everyone from benchmark in Silicon Valley to a lot of banks in New York,

to an investor in China. And it's not clear where they're going to go next. And there was kind of a moment where they were thinking of going public in, in kind of 2016, that, you know, they didn't at least explored it because they knew they needed more money to continue their expansion. And then SoftBank showed up. Then Masiyoshi-san met Adam Newman and after a half an hour meeting decided to give him $4 billion to supercharge WeWorks growth. And I think many WeWorks employees told to me, you know, looking at that moment, in hindsight, we wish that had never happened and that that sent the company on a trajectory that was unsustainable and kind of enabled some of the worst impulses.

I mean, you know, to take a pause for a second, Adam deserves a lot of credit for how big we work got. I mean, you know, he and Miguel had this good idea. They pushed it as far as they could. They were ambitious. Eventually, once he had a sort of near limitless supply of money, there was, you know, some problems started to emerge. All right. Let me get back from this quick break. I want to know how he made that jump from the benchmark money, which we would call in the Ali like the smartest money in the room, obviously, and then having this unlimited pool of resources and how he was actually convinced Masayoshi San to make a $4 billion bet and to scale this thing when we get back on this weekend startups.

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the strategic decision to let the facts speak for themselves. And really, the fact is, it was a good business, maybe not a great business, not a tech business, with a founder who was, you know, effervescent, mercurial, but then quickly, who I'll use the word, became deranged and disconnected from reality. And as far as you estimate, this happened when that $4 billion dollar infusion comes in. And to set the stage here, Masay Yoshi-san, I've met with him, actually when I went to Tokyo, I met with him two hours, two times back-to-back, three hours each time. I mean, he is an intense guy.

And he loves ideas and he loves whiteboarding. But am I correct that Adam showed up late for his meeting with Masayoshi-san? And do you know if this happened in New York or in Tokyo? The other way around, actually, Masa was late. Masa was late. Masa was late. He had an interesting day in New York. This was December of 2016, which, if we can go back to that moment almost four years ago, Donald Trump had just been elected president. And the reason Masa was in New York was to meet with Donald Trump, basically in hopes of currying favor with the Trump administration for a variety of things that saw...

Well, was this the whole lobby thing where everybody during that like two-month period before the inauguration was going to kiss the ring and the law. Bobby and Masayoshi. Oh God, that was so brutal to watch everybody go kiss the ring. And then I think Masayoshi's song comes out with like some like piece of the PowerPoint and holds it up and Trump had signed it or something. I can't remember. Yeah, it was like it was a piece of paper saying I'm, I may butcher these numbers, but something to the effect of we want to invest 50 billion dollars to create X amount of jobs. We're going to do it in the next four years in the United States, convenient. tied to the term of at least one presidential term.

Interesting. I wonder actually if you go back and look at how much he invested if it actually turned out to be $50 billion. I think it's definitely, it's definitely tens of billions, that's for sure. If there's an interesting, among all the things I had to do for this book,

one question I wanted to look back on and haven't yet. So if there's any enterprising journalists out there or anyone who wants to tally up how much SoftBank actually invested in the United States, how many jobs were created because that was the promise. And I'd be curious to see what the answer actually is. Yeah, it's definitely not, it might be half. It's not small. Yeah. It's not small. So that was the crazy day. So he gets, yeah. So he, he, he meets, he meets Trump and, and, and, and then he has this meeting with Adam. And and they had met very briefly at a, at a conference in India, um, earlier in the year, a startup conference where Adam spoke.

But this was really the first time that Masa had even been in a WeWork. He kind of knew about the business, but it wasn't something that SoftBank thought about. They were a tech company. The Vision Fund, which they had just started, was focused on artificial intelligence. It was not focused on real estate. And so, yeah, Masa came for this quick tour. Adam took him to WeWorks R&D Lab to kind of show the techy side of the company. and, you know, these were things like a smart phone booth that, you know,

change temperatures or a desk that automatically went up and down. I mean, we're going back a couple years. These were mild innovations, but this was not moving us toward the singularity or anything like that. I mean, come on. It's a little bit laughable that, like, your technology is like phone booth based and, like, standing desk. I mean, I'm here at a standing desk. Like, having the standing desk stand when I get in front of it is not innovational.

all. I mean, this is the truth is, I wouldn't say Adam was a Luddite, but he was not like a tech driven guy. He was a sales guy. He was a hype man. Yeah, it's actually sort of safe to say. I mean, he didn't really use a computer at all. Adam is dyslexic. He's pretty severely dyslexic, and it's something he's talked openly about. And so he's not the guy to sit there and send a bunch of emails. And so, you know, for better or worse, he was, he was not your typical kind of tech CEO. He was the guy who was going to, and, and to his credit, I think, he figured out what he was good at, and what he was good at was getting in a room and pitching whatever he's pitching to, to a group of people. Now, is this the moment where Masayoshi-san takes out his stylist and iPad or something and

draws a term sheet and signs it with him in the car? Yeah, sort of digital cocktail napkin agreement on this deal. And, you know, of course, these, you know, it's a story Adam and Masa love to tell because especially on the way up, it's, it sounds like just this big bet that we're making that, of course, is great. Of course, after that, there were months and months of diligence from SoftBank and a lot of skepticism from sort of the sort of middle to upper ranks at SoftBank about why are we investing in this real estate company, a lot of pushback on it.

But ultimately, as at WeWork, as people told me, Adam got what he wanted when there was something he had his mindset on. That's the same case at SoftBank, and Moss is pretty open about that. When he has a feeling about something, that's what's going to happen. And in the book, I was trying to see, I was trying to guess your politics. And you seem to be a little judgmental about, is the only part I felt you were a little bit judgmental about, the strategy of a lot of misses are okay if you hit a home run. Do you think that that is a bad aspect of capitalism or a good aspect? Are you indifferent about it?

Are you a socialist? Are you a socialist? How would you describe yourself when you look at capitalism and especially high growth startups? I think it's an okay model. It's a risky model, right? Like it, you know, going for home runs every time, you know, you have a tendency. And I think sometimes the home, you know, sports metaphor is going to fall apart.

But sort of the home runs, the ones that are successes can have kind of these unintended consequences. I mean, we work for years was a was a home run. And now we're looking at kind of a situation where it has sort of like almost warped the sort of real estate world in the way that, you know, soft bank dumping all of this money into various industries has kind of warped these industries. Like, how much are we actually willing to pay for a cab ride or our burrito to be delivered or office space?

We don't totally know because all of these services have been subsidized. I mean, you might not call it socialism, but it's not capitalism, at least that it's sort of rawest form. And I think to think about sort of the dangers of this, I mean, I remember there's a guy I quote in the book who was sort of a competitor of Adams. and just talking about seeing him on the way up, this person was sort of, you know, an avowed capitalist. And he, but he kind of said, you know,

if Adam is successful sort of the way we work played the game of kind of playing fast and loose, growth at all costs, that's all that matters. Is this system actually like good? Is the system, as we've set it up, like, good for the broader society? And I don't have an easy answer to that. I think clearly I'm a user of a lot of these services, but I do think we have to grapple with exactly what all this money that sort of started sloshing around, particularly from the Vision Fund and what that actually did to various industries.

So in a way, what you're saying, if I can recap, it is perhaps venture capital and the venture industrial complex feels efficient, but this layer that came on top of it, the Vision Fund feels like maybe a perverted capitalism and the unintended consequences and is maybe that's where it jumped the shark. I think that's fair. Like, I don't think this is a story about venture capital is evil. I think that it produces a lot of very good things and great companies.

But SoftBank pushed it to another level. I am curious to try to understand what the lessons will, what lessons will be taken from this, if any. Part of me wonders if there will be any, and, you know, the fact that we work Flamed out will just be, you know, a home run that fell short at the warning track sort of situation as opposed to viewed as a total swing and miss. Yeah.

What does your gut tell you? I think it's the former. I think that there won't be lessons learned. I think, you know, people will choose to kind of laugh at Adam and we work as a, you know, just something to kind of make fun of, but, you know, you look at these cycles kind of repeat over and over again from the dot-com bubble that we talked about to, you know, everything leading up to 2008 to this. There are, you know, differences, of course, but when when people see the chance to take over the world in various ways, you know, it's going to be hard pressed to, you know,

to not, not do that. All right. When we get back, I want to talk about the end, the end of the line for for Adam and how this all came apart. And then what is the possibility that Adam comes back and has a second act? And what is the, where are the chances that we work actually that some value comes out of the rubble when we get back on this week in startups? This week in startups is brought to you by Silicon Valley Bank. What's next? What if? Are we ready?

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unsustainable and he was out of control. It was clear for people who were at Softbank, that he was out of control and that this, you know, from rank and file people, that this was a bad idea. Masayoshi-san, though, when he wants to do something, does it. He has had the Midas touch. He has taking his own counsel and become the greatest investor in the history of investing up and down. Obviously, Macuro lost, you know, close to $100 billion in net worth over 50 billion. The dot-com boom and then came back and, you know, did the Alibaba deal and other deals that make him pretty crazy genius, as it were. Adam's behavior became so deranged that the entire partnership of benchmark flew out to try to rein him in at a certain point.

Tell me, how did you get that information on that story? And what actually, tell the audience what happened when Bill Gurley and the crew fly out to New York and sit Adam down and say, hey, pump the brakes. Yeah, well, and this was, you know, truthfully, before the soft bank money even arrived. It was, it was sort of in this period where, you know, the negotiation was happening. And benchmark was dealing with this not only at, at WeWork, SoftBank was at the time talking to Uber as well and eventually made a gigantic bet there. And the basic situation was, there were some red flags. There, one that you mentioned was the fact that Adam was, selling so much of his stock was something that he was already doing. You know, Adam often gets compared to Travis Kalanick in various ways, just as kind of hard-driving entrepreneurs of this era. But Travis hadn't sold his stock for all the criticisms. He wouldn't let anybody sell shares.

He went out of his way to not let us sell our shares in the company. Yeah, which was... Which may be its own issue, but... Well, it actually turned out to be very wise because the round of investing I was in the angel round, people did have the right to sell. Some people did to their peril. And so they sold at $4 billion and the company quickly became worth tens of billions and those people felt really stupid when they did. And holding on, you know, that's one of the great things about private companies is, you know, you kind of got to sit on your hands with the stock and

you can't make a stupid move like people often do when companies go public, which is a stock is going up and they sell it. Stocks are going down. They hold it. You want to do the opposite. stock's going up, you want to hold and, you know, it's hard to do. Well, and I think that you get to kind of the issue there. So, you know, in this meeting, they pushed back on item on that front. They were worried about the growth of the company and worried that it was going to get out of control, especially once the Vision Fund money came through. At the same time, and for all of the problems that we were benchmark, made out great.

They made hundreds of millions of dollars on their bet here. It was not the billion plus that they might have hoped to make. but along the way, they sold shares too as SoftBank came in and did well. And so for all the ways that you would expect, you know, the proverbial adults in the room, whether those were the investors or kind of the sort of people who started to fill the executive ranks coming from big companies elsewhere, all of them, none of them were really that incentivized to question Adam and what he was doing. The stock kept going up and up, at least in theoretical value.

Adam's gambits continued to work. And he was someone who was just very strong-willed and pushing back on him, you know, was not always well-received. So I think some of these investors, even, you know, the benchmarks, the smartest money's out there. When things are going well, sometimes even if your judgment is telling you to do something else, you kind of have to, you're willing to go along. And in this case, you know, they didn't have that much power to actually. voting shares. So he had... So Adam had control of the company, which he had sort of rested from the other investors. So there was only so much anyone could do.

Yeah, that I think is one of the legacies of all this, which is the super voting shares and not proper, having proper governance is something that the Valley has definitely reconsidered. Post, Uber, post Adam Newman is, you know, let's make sure we have good governance here. And then, you know, the personal behavior, I mean, at some point, he was a little bit of on a private jet smoking weed. Yeah. He was smoking weed in his office. He was having these summer camps where my understanding was they were more burning man than

corporate retreats. I think that's right. What did you hear about those? I mean, all of the stories are true. And frankly, there's probably crazier ones that I wasn't able to dig up. We work in place keep telling me more and more, even as they get their hands on the book and stories that were even wilder. What was the nature of these?

I mean, I used a colloquialism Burning Man, but what was happening at these summer camps? It's a lot of partying. It's a lot of drinking. I mean, you, summer camp was in theory a corporate retreat. There were speakers during the day. But as we described in the book, you know, at one point, there was, you know, someone from UPS giving a talk about logistics for startups and, you know, the smell of marijuana was wafting over the crowd.

I mean, this, you know, it was, it was a great weekend. And, and, you know, for for a lot of people, a lot of employees at the company, the people who went to these events, it was the most fun they'd had at work or otherwise. And that was part of this sort of, for a while, it was part of the appeal of the company. It was, it was, again, like wanting to have a keg in your office as long as people are using it responsibly. And you can sort of spool out this metaphor of like, it's all good and well when things are going well. suddenly when they're not, then the fact that you have this expensive private jet doesn't look like frugal governance and in fact looks like the exact opposite, even if at the time there was some justification for it.

Yeah. And the incessant partying and doing shots of tequila while working in the age of, you know, people being really examining corporate behavior. I mean, talk about a recipe for disaster when the founder is encouraging people to get slashed, young people. I mean, what do you expect to happen? But harassment and HR nightmares during all of this. And that emerged at WeWork, you know, it, I mean, there were stories early on of Adam, you know, he's walking around the office Tuesday, Wednesday night at midnight, encouraging people to stay late and work and pouring shots and handing out stock options to anyone who's like sticking around and willing to take a shot. with him. You know, you're encouraging a certain amount of devotion to him, which there is kind of

a cultish aspect to WeWork, which many people have commented on. But that goes off the rails. And I think the final summer camp they had in 2018 in London cost millions and millions of dollars. And it started to not be fun anymore. It started to be like, you know, I think the employees of the company kind of woke up and were like, what is what's going on here? like why are we doing this? So I think there was kind of a general sort of awakening at a certain point. Did you watch this nexium, The Vow? And have you been watching?

Oh, it's pretty interesting. When you look at sort of we work in the cult of personality, it does feel like he was leading, not an explicit cult, like intentionally, but people who were drawn to it were drawn to, you know, their friendships were all at work. Their entire lives were about we work. And he was pitching it as this was the future of, you know, we went from the iPod, the iPhone, the eye generation to the Wii generation. It's quite clever in a very like, I don't know, simplistic way, I think.

But his behavior and the way he ran the company was clearly deranged. And the self-dealing was the thing I always, you know, from the outside before the whole thing fell apart, I just felt like the self-dealing showed such a lack of awareness of how that stuff would be perceived. Yeah. He was licensing the trademark to the company. He was buying buildings and selling them back, renting them back to the company. He had a surf company, like a wave machine company he bought.

And then his wife was doing a school. She had no experience in education. Were these unchecked, you know, blank checks and self-dealing, the undoing, do you think? Or was it something else? I think they're probably more symptoms of other issues. and maybe the bigger issue is sort of a blindness to how, as you point out, how those things would be perceived.

There's, in each of those cases, there's a, there's kind of a logic to it if you, if you want to tie yourselves in knots. I mean, you know, the wave pool company, there was some thought that maybe we were, could, would create these giant kind of corporate retreat centers and that part of that would maybe be a wave pool. But even just saying that now, you sort of have, can't help but kind of laugh at, at at the idea of it. And so I think there was a certain lack of self-awareness of how these things would be perceived,

how it would change people's perception of the company. And it definitely fed a feeling, especially towards the end of, you know, that the wee revolution is not for everyone, that in fact there is a class of people that is benefiting from this more than much, much more than the rank and file and that it was Adam. It was not just, it wasn't just Adam. It was Adam and his friends, Adam and his friends and family. And so again, the perception of that certainly fed this notion of hypocrisy in what the company stood for and what it actually did. He was entitled and deranged.

I mean, this is a level of entitlement where you're telling people it's about us. It's about we. But you're selling shares at an alarming rate. You're self-dealing. and you're, you know, grinding the janitorial staff. I mean, that was also instructive. I'm not a fan of unions necessarily. And I think that those have all, you know,

kind of unintended consequences as well. But he was paying the janitorial staff, 11 bucks an hour, they want a 20. If this is such a great company, maybe there's a way to meet halfway. And there's this point in the story where you're telling you he's lecturing the, striking janitorial staff, which was from an outsource firm, about how he was the American dream

outside the building it. I mean, this is deranged behavior. I mean, talk about a lack of self-awareness entitlement. Yeah, and Adam didn't grow up rich. You know, he had kind of a difficult childhood. His parents were divorced. He grew up in Israel. He bounced around a lot. He came into himself at a certain point, clearly. But then, you know, money and power. do weird things to people. And he very, very quickly entered kind of a very elite circle. And he always had confidence in himself. He was, he was cocky from being a teenager even. And so, you know, once you get a taste of success, you know, it can do strange things to you. And I mean, you take the soft bank example, all these people kind of wanted to want to say, you know,

Adam, you, you know, if only we hadn't taken Mas's $4 billion, and it's like, well, who's, going to turn down, you know, $4 billion? There's this level at which, you know, you would like to think Adam could have kept his head a little bit better, but so many people from all different directions were, we're puffing him up more and more. Yeah, the, the most interesting moment in the book for me, that was, uh, illustrative of his personal derangement. Well, maybe you can guess it.

There's a moment when he's doing an activity. There's a moment when he's doing an activity. And it was so instructive of who this person is. I need more of a hint. There's a lot of activities. Yeah, he's doing a jet ski moment. Yes, you got it. Which one?

Well, there's multiple jet ski moments. Yes. Are we in Hawaii or upstate New York? Yes, the Hawaii one is the most. For me, I mean, there's the surfboard and the jet ski one, but tell the story of Honolay Bay. Because this to me explains exactly what a grifter entitled, I'm just going to say, a douche that this guy was. I mean, you're very, you go in very level-headed, but the, when, and you're, you're non-judgmental. A little judgmental about the sort of strategy here in Silicon Valley, which we can get into.

but you're very non-judgmental of him. And it just, this moment just said everything to me. Honolay Bay. Yeah, I'll tell the story of Honolay Bay. Adam had just closed the deal with SoftBank. He'd gotten his $4 billion. And Honolay Bay is this sort of surf mecca in Hawaii. And it's a pretty sort of laid back kind of eclectic place, you know, tons of

very wealthy people, famous people go there. But the general ethos is you're going there to surf, you're going there to be a part of nature, you're going there to kind of chill out. Yes. Low key. Low key.

Adam went over the Christmas holidays. He sort of had started to make a habit of doing this, and he had gotten very into surfing. And there were sort of two moments described to me by two, you know, startup people who were also, there just happened to be vacationing, knew who Adam was, recognized him. And at one point, there was this moment where he, Adam was being sort of pulled out to see by these two locals

who were swimming him out to where the good waves were and he was just grabbing onto a rope and kind of holding them behind. And it was just sort of this, this metaphor of like, you know, surfing is supposed to be you kind of communing with nature and, and the effort is part of it. And it felt like as, as, you know, these people described it, it was. it was sort of a metaphor for for what happened with with softbank where you suddenly got this four billion dollars that meant you didn't have to do the hard work that comes with sort of a bootstrapping a company which which they had done in the earlier days. The end of the story is the next day Adam was also surfing with some friends.

They were out in Honolet Bay, had a couple of boats and a couple of jet skis. And jet ski surfing is this sort of unusual. it's typically done with there's giant waves. If you have a giant wave that you want to catch, you kind of need a jet ski to sort of pull you into it. This was not that situation. This was, again, a situation of not wanting to work that hard for the joy of it.

Cheating. It's, it's certainly cheating sort of the values and ethos, if not any hard and fast rules. And Adam gets pulled into a wave on this jet ski and gets up on his board, surfs it to the end, and sort of, you know, puts his arm out to the side.

I think we describe it as sort of like Christ the Redeemer, stares up at the sky where a drone has been filming his every move. And that is his celebratory vacation. It's so deranged. And so when you think about the context of Kauai, the Garden Island of Hawaii, Honolay Bay, which is the most beautiful, tranquil, easiest surf break in all of Hawaii probably.

In fact, Puff the Magic Dragon, the Peter Paul and Mary's song, is based on Honolay Bay in a land called Honolay. And so Michael Crichton used to own three of the houses on the beach. And I used to rent one of them from Michael Crichton. So I know it. And it is like you're saying, like you're supposed to be very low-key when you're in Hawaii

as somebody coming from the mainland and respectful. And this is such deranged crazy behavior if you were doing it in Long Island or Newport Beach. To do it in Hawaii is so disrespectful. To use other people to pull you through the wave in Hawaii, I mean, it would be like, I don't know, killing a shark or something. Like, this is just unbelievably disrespectful

of the Aloha spirit of, you know, Hawaii. So what do you think happens from this point? Is there any save possible here? Because on the way out, they give to get him out, he's such a shark, he gets paid a huge payment to leave while everybody else gets screwed. But they didn't pay him everything, right? There was a little clawback. Yep. And are they in a lawsuit over that?

what's the latest on that? Yeah, there's been a couple of clawbacks. We just learned this week. I mean, roughly speaking, Adam got a billion dollar payout to leave the company. And there were various parts of that. Some were paying back loans that he had taken out. Some of it was a consulting fee,

$185 million consulting fee to advise the business and partly to make sure he didn't go start a competitor. And then there was a secondary offer that they were going to buy a chunk of his stock, along with other shareholders to roughly be about a billion dollars. That tender offer is stuck in a lawsuit. SoftBank has said that WeWork has sort of reneged on some terms of the deal. There have cited some investigations being conducted by several state attorneys general that we don't know too much about, but SoftBank has cited some investigations.

of this to sort of hold up that end of the deal. And then just this week, Marcella Clare, who is one of Mase's deputies at SoftBanking, came in as the chairman of WeWork after Adam was pushed out, says that they have not paid Adam all of that consulting fee. So he's fine. He did just invest $30 million into a residential living company last week. So he has money to throw around, but he doesn't quite have. the billion dollars yet.

Yeah, see, it's very interesting. I thought his other idea that was very prescient and a huge winner was we live. That was another great idea. It's a good, I'm skeptical of it. And I'm living here in, in New York, where me and my cohort of people in their 30s, and I think most people, what we want is the largest apartment we can possibly afford.

And what Adam was offering was the smallest apartment. you could possibly find, but I'm going to give you some common space to sort of hang out with people. That, uh, it's, it's a nice idea. It's sort of based in, in kind of the kibbutz that, that Adam grew up in, in some ways, but, and, and it might be nice if, if humans were more open to spending lots of time with, uh, the people, other people who live in their apartment building, but the, the reality, at least in most cities is that we all kind of, we all want our own spaces.

for better or worse and maybe even especially more now. Yeah, the pandemic does change that. I thought when I was in my 20s in Manhattan, when I was sleeping in my office at Sony, and I would literally, because I had an apartment way out in Brooklyn, I would sleep under my desk two or three nights a week in a sleeping bag that I hid in my file cabinet in my tiny little closet office,

and then I would shower in the gym. And so if I went out at night, I'd just tell people, I'm going to the server room to reboot some computers, and I would just sleep under my desk. They just kind of like... You might have liked it. Yeah. And I thought we live was like pretty good for the 20s crowd.

But then back then you didn't want to be in Brooklyn. Now you do want to be in Brooklyn. Back then you wanted to be in Manhattan at all costs. So being able to stay in Manhattan overnight was like the huge goal. As we wrap here, Joey Cables. Yeah. My favorite character in the whole. You got to tell this story of Joey Cables.

This to me is like just super indicative of how poorly run this organization was. How is that? Yeah, I think to give a generous reading, it's also, you know, think of the early days of any startup. There are weird characters that come in and out, and this is kind of one of the stranger ones. Joey Cabels was a 16-year-old high school student. He lived on Long Island with his parents. He went to school in the city at Hunter College High School. And he, in 2010, got an office at WeWork because he had a job basically providing kind of networking services to come.

He was sort of just, you know, in some ways, and friends and colleagues of his describe him as kind of a genius. He was, he was sort of, he was just really good at the job and really entrepreneurial. His name's Joseph Sone. And he was working at the original we work down in Soho. And one day, Miguel McKelvey, Adams, co-founder needed some help with some wiring or the network was down. knocked on Joey's door and asked if he could help. And he did. And a few months later, they offered him a full-time job at 16 years old as a high school

student. He dropped out and worked at WeWork for the next few years. So the first IT director at WeWork, a company that aspired to become a physical social network was a 16-year-old high school student. Incredible. That's the guy I want to meet. I want to meet Joey Cabell's and find out what his startup I do. is and back him.

That's the guy I want to give a hundred thousand dollar check to. Because that's the hustler. There's always somebody in these stories who you know is that's the hustle. And then as we wrap here, there's other bullets. I wanted to get to a real quick lightning round. Billy McFarland was an early we work. Sure. Tenant.

And Jarlal played at a summer camp, I believe. Billy McFarland, of course, a fire festival. which was the winter. The winter one, guy. Yes. Yeah. So both of the two main, the two main figures in the fire festival saga, of course, intersected with WeWork.

Jarl rule played a concert one night for Wework employees. He did complain about his setup and seemed to try to sort of get out of it, but he eventually played the set. Seems to be a theme in his career. It was a tenant. Yeah, a little bit. Billy was a tenant with his businesses. Early on, pre-fire festival, he had a few companies, Spling, Magnesis, and he had these offices at WeWork.

And at one point, he even talked to WeWork about selling Magnesis, which was sort of this clubhouse credit card for millennials kind of idea that got him into all kinds of trouble even before fire started. But, you know, he did, when I talked to Billy in prison, where he currently is, he, he, did say that he took some amount of inspiration from, from Adam as sort of a pitchman and from WeWork as kind of a company that brought people together, which is what he says he was trying to do with fire. That'll be interesting to see, you know,

they have the PayPal Mafia. Interesting to see what the WeWork, you know, diaspora comes up with in terms of crimes and frauds over the decades. Well, there are, there are a few companies. I won't name them yet,

but I will, I will, I have them in the back of my mind where a number of ex-weer people have sort of congregated in their post-weework lives. So we'll see what happened there. Some are backed by soft banks. Some aren't. And the other thing that's happening is, you know, some of them have their, yeah, their own startups that they want to try. And a few told me, you know, they've been in touch with Adam.

And Adam has talked about he'd be interested in floating them some cash if that's something they're interested in. I don't think any of them are quite ready to take him up on that, but I suspect there will be some kind of future for all of these people in one way or another. We work is a viable concern right now. They've got the money. They've still got a business, I guess. We'll see post-pandemic how that works. It does seem like actually the just happenstance closed offices would be the way to go with the coronavirus versus an open office plan. probably take your mask off inside the offices?

I think, well, I don't know. That's the proposition that they're offering. I mean, you know, these offices are closed, but do you want to sit in a glass cube all day? Eventually, you're going to go have to go out to the canteen and go get your coffee or whatever it is. They're certainly pitching themselves as the sort of flexible path forward in the pandemic of saying, you know, saying to companies, you might not need your headquarters that you need it, that you need. that you needed a year ago. You might just need a place for employees to go every now and then or have meetings.

And they're trying to pitch themselves that way. I think it's going to be a tough road ahead just because the business was based on squeezing people in and as many people as they could, which is just not what you want now. So there's some reason for optimism, but I think they're trying to figure this out along with the rest of the commercial real estate world. And it's just going to be a, you know, until people are comfortable coming back into an office. I don't see how any of these businesses are going to be going to be profitable or even survive. I mean, I hate to ask you to be a psychologist. You think this person is deranged

mentally ill or... You've used the word deranged a lot. Yeah. It just seems like the behavior, I would describe his behavior as deranged, like lighting a joint in a business meeting or asking for there to be a cannabis ventilation system in your offices or lighting up on a flight. This is deranged behavior. I'm sorry. And like doing shots on the roof of a building when you're not supposed to go up on the building and then shooting the investors with a fire extinguisher. This is the behavior of a deranged person.

And I got to think that mental illness might be part of this. And it feels like this is not a story of somebody who is just an aggressive founder and then we see him walking in the street and bare feet. I actually, and I don't think this forgives anything, but I do think that this might be a mentally ill person. Did you get, did anybody say to you, I think this person is bipolar? I think this person is manic, because it seems like bipolar manic behavior from the outside. What did people tell you when, yeah.

I think I'm going to take a pass on medically diagnosing Adam. The thing I'll say is that there's a thin line between. between deranged and unconventional. And that line is basically success. And if you're, if things are going well, who cares if you walk, walk bare feet in the office?

It's kind of a fun, weird quirk. Once things go badly, all these things look very different. And so, you know, that's, that's,

I would say, the generous reading. But I think, you know, Adam, Adam is a unique and unusual person. and I think, you know, a more kind of conventional kind of person wouldn't have built this company. Wouldn't have pushed it to, I mean, there's examples of it, you know, that I, that I talked to throughout reporting this of other people who ran similar businesses.

And they were just kind of content to have, you know, half a dozen spaces. I might have a space in New York and Philly and Boston. And that's good for me. Yeah. there's clearly something different about Adam that made him want to do the things that he did. What was the most uncharitable view that people took about him when they were talking to you in confidence about this? Because obviously there are people who are close to him, like, and I don't expect you to. And I like actually the way you sort of summarize it.

If you're successful, it forgives a lot of eccentric behavior, right? Like you're just eccentric and successful, right? okay, great. But what did the people close to him? What did they think was his sort of deal, as it were? I talked to one, I mean, truthfully, it depended. I mean, some people, some people really, you know, some people would tell me he didn't, he didn't care about the people around him. He didn't care if there were sort of, you know, bodies underneath the train as it, as it moved forward. And that was a critique. And then I would hear stories of sort of great kindness that he would do to people.

So that sort of complicated this picture. And one, you know, one of his executives kind of put it to me sort of in this, in a particular way that I thought was useful of thinking about, like, there was a part of Adam that was, you know, something like 25% ego, 25% generosity. And I'm going to forget what the other percentages was, but it was like which side of him is going to win on any given day. and that's kind of the battle we face, you know, that all of us face.

But Adams just seemed to have these more forceful sides of his personality that would win out and sort of dominate the day. Yeah, I think it's narcissistic personality disorder, bipolar. I can diagnose this from a mile away. I'll let you do it. Yeah, you're a journalist. You've got to be just based on my experience investing in 200 companies and having friends in this.

Like, if you think about this specific, you know, condition, an inflated sense of self-importance check, a deep need for excessive attention and admiration check, troubled relationships, check, a lack of empathy for others, half-check, like some people felt that way, some people didn't. But behind that massive extreme confidence lies a fragile self-esteem that's vulnerable to the slightest criticism. is that was he did he take the criticism personally do you think people did tell me that you know it's not like adam was just walking around uh constantly brimming with confidence that he was actually could be a very anxious person and and behind the scenes was was nervous before big meetings or big presentations sometimes um marijuana helped with that sometimes just getting in the room

and getting in the flow uh helped with that so you know yeah it's it's it's it's it's it's it's it's not as simple as saying he was just kind of always on. Like, I think in many ways, he dealt with a lot of the same anxieties that we all do. And his way of responding to it was to sort of go out and be kind of this charming, confident person. Confidence, man, Gryfter. Like, he did get pumped up for the meetings. That was the interesting part. You had these tremendous anxiety and feelings of doubt when he was going into meetings that he was desperate to get a meeting with Elon to talk about. I'll end on that.

That was bizarre. We work Mars. We work Mars. Yeah, they had a meeting at SpaceX in L.A. a few years back. And yeah, you know, Adam, this was kind of part of the whole game of wanting, you know, wanting the company to constantly be shooting for something bigger, which has its merits. And in this case, it was, Earth is not enough.

Mars is where we're headed. And once Elon gets us there, we're going to build the community. that keeps the astronauts sane once they're up there. Elon was late to that meeting, much as Masa was late to his meeting with Adam, but it ended very quickly and with Elon pretty quickly dismissing Adam and saying, you know, it's actually getting there that is the hard part. We'll deal with the rest of it and we'll figure that out once we get the hard part done.

I thought that was like, you know, just knowing Elon, like he doesn't suffer fools. and like the idea that this dipshit's going to be like, you know why, Elon, the hard part is not getting to Mars. The hard part is creating a community on Mars. And Elon's like, no, that's incorrect. It was great to meet you by. I mean, literally, that's what happened. My sense from not being in the room is that is more or less what happened.

Yes. And I think that speaks volumes. Listen, congratulations on your first book, billion dollar loser. Everybody go buy it. If you like it, write a review. it's really great. Who's your publisher? Oh, Little Brown.

Little Brown. Wow, very well done. Little Brown. They got a lot of New York. Is that Malcolm Gladwell, Sue? You're testing my knowledge of the publishing universe, which I don't know. So that may be the case. Yeah, it's like a boutique imprint for those New York elite New Yorker writers.

Thanks for being so candid. Guilty as charged. Guilty as charged. Continued success. And everybody go buy the book. And if you like it, write a review. If you don't like it, yeah. Don't write a review.

Don't write a review. Please, go write a review. All right. Listen, great job. And good luck on your pandemic book tour. I know it's a bit of a bummer to not be able to go on tour. But they don't have budgets for that anyway anymore. Yeah, who needs it?

It's more fun just sitting here talking to you. So we both missed the book tour budget of these things. There is no budget for that anymore. Yeah. That was like a thing in the 90s where like, I know, the good old days. It would literally send you around the world. and you go to book readings and all right, listen, continued success.

And we'll see you all next time on this week's service. Bye-bye.